How Giants Fall in China
Government favor can help private companies swell to gargantuan size quickly, but those debts will eventually have to be paid.
Political problems have stalled the Forest City investment.
Photographer: Roslan Rahman/AFP/Getty ImagesChina likes to tout the virtues of its private sector, whose firms are the source of most new jobs and most economic growth in the country. Not all private companies are created equal, however. Those perceived to have the state’s backing can grow disturbingly fast and crash to earth just as quickly.
Behemoth China Minsheng Investment Group Corp. is only the latest example. The company was founded in May 2014 to act as a private-sector version of a sovereign wealth fund, one that would supposedly be better at investing than its state-run counterparts. Its founding investors included 59 different private companies, who pooled together some 40 billion yuan ($5.9 billion) in registered capital.